Ecommerce driving demand for warehouse buildings

By Lightwell | Thu, Oct 03, 2013

The booming online retail market has impacted numerous industries as businesses attempt to redesign themselves for eCommerce. Warehouse real estate may not be the first market that comes to mind when considering eCommerce, but the numerous companies engaging in online sales have created stronger demand for storage space.

Companies are likely to face two primary challenges as they acquire more warehouse capacity. The first is the simple fact that demand for space is pushing the cost of rent upwards, the Financial Times reported. Warehouse developer and owner Prologis said that average rates increased 4 percent since last year, and 2013 is the first time a rate increase has happened in two consecutive quarters in more than four years.

The second issue is that relying on older facilities may not be an option in the age of eCommerce. As the Financial Times noted, selling online creates new demand for warehouse inventory management, including:

Support for smaller orders

Higher employee density

Urban locations to facilitate short delivery times

"The supply chain needs of online delivery are completely different from in-store delivery,' Prologis chief executive Hamid Moghadam told the Financial Times. "Companies need new buildings and this is driving demand in a very big way."

As space becomes more expensive, organizations will likely need to find cost reductions in other areas to maintain the same value they provide to their customers. Most organizations could leverage technology for greater efficiency in operational practices. For example, in identifying common warehouse management challenges, Tim Garcia, CEO of software provider Apptricity, recently highlighted the following:

Inventory accuracy

Inventory location

Space utilization

Redundant processes

Item picking optimization

As these issues showcase, organizations can achieve greater efficiency and make the most of their real estate by adopting more sophisticated warehouse management software. Particularly in light of growing rental rates, maximizing available storage and optimizing layouts will be critical to keeping costs low.

Furthermore, solutions that streamline operations can eliminate many of the process inefficiencies that exist in today's warehouses. Garcia noted that many businesses will pass items such as inventory documentation to multiple people before it is sufficiently tracked - in this case, barcode scanning software would be able to expedite the process and improve accuracy. The focus on speed and accuracy is becoming a more prevalent trend, particularly as supply chains expand to incorporate numerous business partners and must connect disparate systems.

"Today, an agile supply chain is more vital than ever, which is why more warehouses are turning to automation to help smooth operations," Garcia wrote. "It all comes down to efficiency and beating the competition every step of the way, from supply chain to sales and delivery."

The warehouse management system market These pressures have created more demand for warehouse management systems. According to a recent report from ARC advisory group, the market for this software increased 8 percent in 2012, in part because of growing interest in omni-channel retail. Analysts noted that many organizations are reconfiguring their warehouses to accommodate their eCommerce initiatives.

In addition, the warehouse management software market has benefited from add-on modules that allow businesses to select the functionality they most need. These options provide supplemental features such as labor management, slotting optimization and analytics.

As technology vendors expand their product and service portfolios, organizations will need to identify their most critical requirements to ensure an IT investment meets their needs and does not result in additional wasted resources. Particularly if more providers offer customizable software packages, the right approach to implementing warehouse management software will vary greatly depending on the unique needs of those employing it.

Warehouse and order management are critical to customer satisfaction - learn how to handle a larger influx of orders with the finesse of a mature company: